Brace yourself for higher motor vehicle insurance charges.

The Insurance Regulatory and Development Authority of India (IRDAI) reviews insurance premium rates. After weighing the number of claims made vis-à-vis the loss ratio of insurers, the IRDAI recommends new rates that are published via its website and debated upon by stakeholders.

This leads to an agreed position and then publishing follows. Third-party motor insurance is a mandatory requirement for all vehicles plying on Indian roads.Notably, this year premium rates have been hiked by 40%. The IRDAI’s justification was that increase in the cost inflation index (CII) by 5.57% over FY 2014-15, i.e., from Rs.1024 to Rs.1081 in FY 2015-16, and increase in the number of claims directed to insurance companies were factors that necessitated rate hikes.

Rate increases: Personal motor vehicles A 40% increase to Rs.2055 has been announced for cars below 1000 cc (Nano, Alto, and Kwid). Increase for cars under the B segment (1000 cc and 1500 cc) is up to Rs.2237, while for sedans the hike is by 25%.

High-end cars, though considered safer and more fuel efficient and eco-friendly, have also not been spared. The premium rates have been increased by 25% to Rs.6164 for the category.

Two wheeler motorbikes Insurance rates for two-wheeler motor bikes below 75cc have been increased by an average of 9.6% to Rs.569, while for those falling between 75cc and 150 cc, the rates have been increased by an average of 15% to Rs.619.

For Premium bikes falling between 150 cc and 350cc, rates have been hiked by 25%. Premium rate slashes However, some have been kept out of the ambit of rate hikes. Also, some are getting reprieve in the form of a downward review of rates.

Notably, IRDAI has not increased premium rates for public goods carrying automobiles below 7.5 tons and those between 7.5 tons and 12 tons, maintaining their premiums at Rs.14390 and Rs.15365 respectively.

Unexpectedly, for super bikes falling under above 350cc, the regulator reduced premium rates by 10%. A similar reduction is also applicable for goods-carrying private vehicle carriers.

For goods below 7500 kg, the rates have been increased to Rs.7849. India has a heterogeneous road traffic mix.

We have a fair share of vulnerable road users who share space with high-speed vehicles, operating vehicles that are in poor condition, over-speeding vehicles, people who fail to observe traffic laws and drive under the influence of alcohol.

All these factors contribute to the high number of motor vehicle accidents seen on Indian roads. Increased claims will lead to hike in premiums.

An effective effort by both the government and insurance companies is essential towards reducing road accident rates.